Thomas Edison's Famous Interview on Money.. Gold is the devil

OK maybe not so famous.  But to the readers of the January 16, 1939 edition of the newsletter "Social Justice" it was famous enough to merit that for a byline in CAPS LOCK.  Here is the first page of the story.

For better resolution, download the page in two parts..  Top half and Bottom half.
Edison was making a case for the government to issue a special currency to pay the workers and suppliers for the Muscle Shoals Dam public project, instead of issuing bonds so they could borrow American dollars from the Fed.   There is a continuation to the interview which I will have to obtain and post later,but there is enough on this one page to chew on for a while.

This was back when the dollar was based on the gold standard, something that Ron Paul and the Tea Baggers clamor for today and try to claim would solve the USA's financial problems.  Turns out that 72 years ago when there was a gold standard for the dollar, the forerunners to the modern day Tea Party considered gold as an evil tool of the bankers that forced the USA into paying interest on bonds for public works projects instead of simply issuing paper currency.  hmmm.  interesting take. 

As for "Social Justice" it was a newsletter of articles written by a variety of columnists and pundits from 1939 and it's Patriarch was a Catholic priest named Father Coughlin from the Detroit area.  The tone of the columns was that Communism was the biggest threat to the USA in the days leading up to WWII, not the Nazis in Germany or the Japanese. It is pro-labor union and anti-banker.  It is an interesting history lesson to read through the articles to get some counter-mainstream perspective on the pre-WWII debate in the USA.  Most of the articles centered on the revolution in Spain and the communist infiltration into the USA.

 The only evidence in this issue of what would be considered Antisemitism was written (allegedly) by a Jewish man explaining how he had been conditioned from youth to see himself and all other Jews as victims in any and all situations.  It is a 1939 example of the self-hating Jew I suppose.  That article was bad enough, but actually I expected much worse from "Social Justice" based on all I had read and heard of Father Coughlin.  Perhaps by January of 1939, he had already been told from on high to tone it down.     

I wonder what Edison would say today about an impending default on the dollar due to in part the USA's compounding interest payments on the federal debt.  He might be calling for a special currency to use only within the USA for debts like social security checks or public employee paychecks. 

In any case it's an interesting perspective from one of the great thinkers in American history.

When it comes to the economy, reality is perception.

I assume the Teapot conservatives who are thumping their chests in debt limit talks like silverback gorillas and making threats about forcing a financial default are doing so to apply pressure to make meaningful long term financial changes for the good of the nation's future. But just the threat of a financial default is causing damage to the economy. Perception is reality and the perception is that the politicians in Washington are playing chicken and no one wants to stand on the pegs in a game of chicken with a crazy SOB steering the bike through the crowd.
Obama, Republicans clash in debt talks; dollar falls

Talks have become more acrimonious in the past few days, as Republican and Democratic leaders have lashed out at each other and hardened their positions, making compromise difficult.

While the specter of Moody's announcement hung over Wednesday's White House meeting, it unnerved traders and refocused the attention of investors on the stalemate in Washington.

"They (Moody's) are worried they are having these ideological arguments while Rome burns. They want to say this is serious," said Carl Kaufman, portfolio manager at Osterweis Capital Management in San Francisco...

"What has been beginning to spook Moody's and some other people is that Congress may be dumb enough to actually default on the debt," said Cliff Draughn, chief investment officer at Excelsia Investment Advisors in Savannah, Georgia.

The doubt over how the game of chicken will end will eventually lead to a downgrade in the USA's credit rating which will result in higher interest costs for borrowing, thereby complicating any deficit reduction efforts.  So the grandstanding over hypotheticals comes with a very real price for the ordinary Joe Sixpacks that the Tea Baggers claim to be representing.  And if, God forbid any one's Social Security checks are delayed over the haggling, then Boehnner, Bachman, Paul et al will rightfully get blamed in the court of public opinion no matter how they frame the story after the fact for their willfully ignorant devotees. 

It took decades of politicians and voters sleeping at the wheel for the country to get into this mess. It's not going to vanish in the wake of sloganeering and political rhetoric. It will take a long-term pro-growth agenda that builds economic momentum by eliminating waste, promoting innovation and unleashing capital. 

Government has to remove impediments to profitability to generate sustainable economic growth. Simply slashing government spending or increasing tax rates won't eliminate budget deficits and the need for an ever-increasing debt limit.  

Hopefully sensible people will drown out the ideologues in Washington, but it is impossible to predict how a game of chicken will end when crazy people are playing.

Debt ceiling deniers = Ignorance divided by zero.

Yeah it was real funny when they dressed up like Paul Revere, made racist jokes and threatened to bring their guns next time. But now the schtick is past the expiration date and it's not funny any more.     Geithner to GOP: Raise debt limit or 'lights out' 

WASHINGTON — Treasury Secretary Timothy Geithner made an appeal Thursday to House Republican freshmen, a group of lawmakers skeptical of his warning that a failure by Congress to raise the nation's borrowing limit would have grim financial and economic consequences.

...However, some of the 87 House GOP freshmen, a staunchly conservative and strong-willed group, have publicly questioned Geithner's warnings. Dubbed by some as debt-ceiling "deniers," they doubt a failure to lift the borrowing cap would force a default or lead to unpredictable results in financial markets, as Geithner has argued. 

Why wouldn't the right wing of the GOP deny economic science? They deny all kinds of science whenever it doesn't align with their formed opinions or blind faith.  Now, normally when they cling to ignorance it doesn't endanger the rest of us but this time it's different.  Anyone who doesn't understand that our economy and entire society depend on a viable form of currency shouldn't be in Washington making policy, but there they are making threats about letting the dollar default just so they can say "We told you so!"  At some point it would be refreshing to see them put the Country first and not their Tea Party. 

Hopefully the kids in Washington will quit playing chicken on their bikes and get to work on a real plan to prevent default by cutting government waste and growing the economy instead of just shrink wrapping it for the trash heap.

You don't have to outrun the bear, you just have to outrun your buddy.

There is an old joke about two hunters who angered a mama bear in the woods and she started chasing after them.  As the two men ran for their lives, one said, "It's hopeless, we can't outrun the bear!" And the other replied, "I don't have to outrun the bear, I just have to outrun you!"

I'm not sure the analogy works for the global economy because we're all kind of chained together, but it does seem that Europe is running from the bear just a bit slower than the USA lately.      
Europe Sinks Markets:  Stocks, Commodities Fall on New Debt Fears; Jitters Over Recovery

Anxieties about Europe's debt problems have been fanned further by an open dispute between the European Central Bank and euro-zone governments about what to do with Greece's large, and growing, debt burden. As well, a negative report on Italy's credit rating and a crushing defeat in weekend elections for Spain's ruling party intensified concerns that Europe's debt problems were entering a new, critical stage.

A European debt crisis wouldn't be a good thing for anyone, but it might pave the way for a stronger American recovery. When the dollar gains in value compared to the Euro, it may become a disadvantage to American firms that export to Europe, but that would be offset by less expensive imported raw materials used in American manufacturing and industry. The increased value of the dollar could lead to lower oil prices which would help fuel further economic recovery as consumers would gain in disposable income. By deteriorating the finances of European firms that compete with American companies, it may weaken their ability to invest in new product development and facility upgrades, the effects of which may not be felt for several years. While the markets tend to spread economic contagions by selling off everywhere based on negativity anywhere, that might not be the best strategy when one particular market is reacting normally to local conditions.

Europe is still struggling with harmonizing the economies and financial policy of diverse nations who are more concerned with the home front than they are with the state of their union. To work, the Euro zone must coordinate financial policy among all the member states. That's easy enough to do when times are good and the cash is flowing, but now that austerity and budget cuts rule the day the Euro infighting is going to make it tougher for them all to agree how to compete against the common enemies, namely the USA and China.

Through mountains of collaborative financed debt, the USA and China are bound together for the long haul and for mutual survival they will do whatever is necessary to keep each other's economies humming along.  If that means standing back watching a Euro debt crisis unfold, that's what they will do.

The USA should not just stand around and wait for the Euros to get up off the ground, dust off and get back in the race.  We should keep running as fast as we can and let the bear catch the slower guy.  That's what people who want to stay alive do.